Dimitris,
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of
> Dimitris Pavlopoulos
> Sent: 04 May 2006 14:45
> To: [email protected]
> Subject: st: Xtivreg with categorical endogenous covariate
>
> Dear all,
>
> I want to run panel regression with a continuous dependent
> (wage). Among the covariates I use, one (job mobility) is
> endogenous. Therefore, I want to use a 2SLS fixed effects
> regression. However, my endogenous covariate is categorical
> (has 3 values 0,1,2).
>
> What I would like to know is whether I can use xtivreg, fe
> for this estimation. Although not mentioned specifically in
> the help for xtivreg, I think that this command can be
> applied only if the endogenous covariate is continuous and
> NOT when it is categorical.
This question comes up regularly on the list in the context of a dummy
endogenous variable in standard IV, e.g.,
http://newwww.stata.com/statalist/archive/2004-07/msg00710.html
The difference here is you have a categorical variable. The answer is
that this is not an IV question, it's a functional form question. If
you think that a linear specification is legitimate, then panel IV is
fine too. If you think that a linear specification is not legitimate,
then endogeneity doesn't matter - neither OLS nor standard fixed effects
nor xtivreg (or xtivreg2) will be legitimate, and you'll need to do
something along the lines you're suggesting.
Hope this helps.
Cheers,
Mark
>
> If xtivreg cannot be applied in my case, would you have any
> other suggestions for doing the estimation procedure? For
> example could I run an mlogit or an mprobit for the first
> step and then plug the predicted probabilities in the primary
> equation in replace for the endogenous covariate? But then
> how can I get correct standard errors?
>
>
> Thank you in advance,
> Dimitris Pavlopoulos
>
>
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